PETALING JAYA – The recent 25 basis point increase in Bank Negara Malaysia’s Overnight Policy Rate (OPR) will not bring doom and gloom to Malaysians, as most banks are currently looking for ways to compete for deposits, including raising the fixed deposit board rates and giving out promotional offers.
Most of the local and foreign banks including CIMB Bank, RHB Bank, Alliance Bank, OCBC Bank, Hong Leong Bank and Malayan Banking (Maybank) recently announced increases in their lending and deposit rates in view of Bank Negara’s OPR increase.
Checks by SunBiz found that the highest board rate currently is Affin Bank Fixed Deposit, which is offering 4.05% per annum for a 12-month tenure, while one of the lowest is Citibank Time Deposit, which offers 2.95% per annum.
The second highest interest rate is offered by government-owned Bank Simpanan Nasional (BSN), which has kept the board rate since March 2017 at 3.50% for a tenure of 12 months.
Meanwhile, six local banks – CIMB, RHB, Alliance Bank, Maybank, AmBank and Public Bank – are offering a board rate of 3.35% for a similar period.
However, foreign banks generally offer lower deposit rates compared with local players, with Citibank being the lowest for the three-, six-, nine- and 12-month tenure of only 2.90% to 2.95%.
On a promotional basis, some banks are offering fixed deposit rates as high as 4.3% up to 5.18% per annum for 12 to 15 months’ tenure.
Analysts opined that the real rate of return on deposits will be back to positive this year and benefit depositors, following the 25 basis point increase in the OPR as well as an expected moderation in inflation.
Maybank Investment Bank (IB) Research has projected the inflation rate to moderate this year on expectations of smaller effect from global cost factors, although Bank Negara acknowledges the role of global crude oil prices in influencing the trend in inflation.
Inflation in December 2017 inched up to 3.5% year on year (yoy) on firm fuel and food prices while core inflation remained at 2.2% yoy.
For the whole of 2017, the headline inflation rate was substantially higher at 3.7% yoy, while the core inflation rate was stable at 2.4% yoy.
Nevertheless, Maybank IB Research said the base effect from the uptrend in Brent crude oil prices in the first quarter of 2017 at 51.8% yoy is expected to offset the impact from the recent crude oil price rise in the first quarter of this year.
“As the base effect is expected to diminish in Q2 2018, we could see upward pressure building up in headline inflation if Brent price stays firm at current level.”
Therefore, Maybank IB Research forecasts Brent crude oil prices to remain at US$60 per barrel this year and maintains its 2018 headline inflation rate forecast range of 2.5% to 3.0%.